Credit agreement – the basis for granting the loan What should the loan agreement look like? What to look for when signing a contract? Credit agreement and possibilities of withdrawal
The basis for granting loans at banks and cooperative savings and credit unions is a loan agreement. Credit agreement in accordance with art. 69 of the Banking Act sets out the rights and obligations of two parties; lenders and borrowers.
Credit agreement – the basis for granting the loan
This article indicates that by the loan agreement the bank undertakes to make available to the borrower for the period of time specified in the agreement the amount of cash intended for a specific purpose.
In turn, the borrower, by signing the contract, undertakes to use the loan amount under the conditions specified in the contract, as well as to reimburse the amount of the loan used together with interest on the specified repayment dates and to pay commission on the loan granted.
Each bank loan agreement, or cash loan agreement, or mortgage agreement should specify the basic issues related to the obligations of the borrower and the lender.
What should the loan agreement look like?
Each bank has its own model loan agreement, which it presents to the customer for review. It is very important for the client to read the loan agreement well, point by point. The signing of a loan agreement should be preceded by familiarizing yourself with its provisions.
Banking law indicates the basic elements of a loan agreement:
- parties to the contract;
- loan amount and currency;
- purpose of lending;
- loan repayment rules and dates;
- the interest rate on the loan and the conditions for changing it;
- method of securing loan repayment;
- scope of the bank’s rights related to the control of loan use and repayment;
- dates and method of providing funds to the borrower;
- the amount of commission, if the contract provides for it;
- conditions for making changes and terminating the loan agreement.
The loan agreement and its elements are negotiable, which many customers are not aware of. Proper negotiation of the loan price allows it to be significantly reduced.
The parties to the loan agreement must be properly identified. The borrower’s personal data must include his:
- first name and last name,
- ID number and series,
- PESEL number.
Credit agreement – what to look for when signing?
When a loan agreement is signed, it is worth paying attention to its key provisions, including those relating to the borrower’s costs. Among them is the commission, which is charged by the bank before the commitment is given or is credited and added to the subsequent principal and interest installments.
The amount of commission is included in the loan agreement. When determining it, the bank takes into account the loan amount, its purpose, the ratio of the liability to the value of the collateral, as well as the borrower’s creditworthiness.
It is important to look in the credit agreement for information on the interest rate on the loan and when the bank can change it. The interest rate is influenced, among others changing interest rates.
It is important that the contract does not include clauses that are not allowed for this type of obligation. Among them are:
- an indication of the amounts of minimum fees and commissions, but without their maximum ceiling;
- collection of double fees, e.g. for early repayment of a loan and preparation of an annex, which is required by the bank;
- charging commissions for increased risk after establishing a mortgage;
- fee for sending the borrower’s notice of termination of the loan agreement;
- presumption of service etc.
If the provisions of the loan agreement are unclear and incomprehensible to the client, he should not sign such a contract.
Illegal clauses in credit agreements may be the reason for its annulment.
Credit agreement and possibilities of withdrawal
It is possible to opt-out of such a contract after signing the loan agreement. Withdrawal from the loan agreement is guaranteed by Polish law. However, not everyone will benefit from it. For example, sometimes it is not possible to withdraw from a mortgage contract if its amount is higher than USD 255 550.
This is due to the fact that the procedure for canceling the loan has been included in the provisions of the Consumer Credit Act. This Act gives the right to terminate the loan agreement if it is a consumer loan of up to USD 255,550, granted to the consumer by the creditor as part of his business activity.
Withdrawal from the loan agreement is possible within 14 days of signing the loan agreement. It is not necessary to state the reasons for such a decision. The bank should accept the withdrawal from the loan agreement. The model withdrawal should be attached to the loan agreement.
If we have any doubts about the loan agreement, it is best not to sign it immediately, but to ask for clarification of its provisions. A good idea may be a loan brokerage agreement when the agent carries out all formalities on behalf of the client, and at the same time provides him with support related to, among others with the signing of the loan agreement.
If necessary, the same intermediary may lead to the cancellation of the loan agreement or withdrawal from the mortgage agreement or other liability.